Riau disallowed to take over Lirik oil block

The government has ruled out the possibility of the Riau province to take over the management and operation of the Lirik oil block which is currently operated by PT Lirik Petroleum, Bisnis Indonesia reported on Friday.

Chairman of BPMIGAS Rachmat Sudibyo said in Jakarta on Thursday that the agency, which is charge in the supervision of the country?s oil and gas exploration and production activities, could not accommodate the local authority?s intention to take over the management of the Lirik oil block.

"The offer given to the Riau government to take over the oil block is no longer valid," he was quoted as saying. He acknowledged that in the past Riau was offered to take over 10 percent interest in the Coastal Plain Pekanbaru (CPP) and Lirik oil block as a training ground for the local government. "But the offer no longer exist now because the local government has already controlled 50 percent interest in the CPP oil block," he added.

Rachmat said with the spirit of autonomy, the local government would still be able to get a bigger share from the oil production in the province even though it did not directly involve in management and operation of the existing oil blocks.

He feared that the involvement of the province in the oil production activities could result in the decline in the production. "The production of the CPP oil block continues to decline since the transfer of the oil block to the local government. The decline in the production causes losses to both the central and local government," he said.

The Riau administration, through the authority of the Indragiri Hulu regency, has proposed the central government to take over the Lirik oil block after the production sharing contract currently held by PT Lirik Petroleum expire in 2006.

Regent of Indragiri Hulu, Raja Thamsir Rachman said that the central government through the Ministry of Energy and Mineral Resources had expressed the regency?s intention to take over the Lirik oil blocks.

The Lirik oil block which is located in the Indragiri Hulu and Pelalawan regencies consists of six oil fields. At present, the oil block produces around 2,000 barrels per day.

The Riau provincial administration, through PT Bumi Siak Pusako, in cooperation with state owned oil and gas company Pertamina took over the operation of the CPP oil block last year after the contract previously held by Caltex Pacific Indonesia (CPI) expired. The production of the oil block continued decline following the takeover. At present CPP only produces about 28,00 barrels per day from more than 50,000 barrels per day under the previous management. (*)